- The Washington Times - Thursday, September 21, 2006

Retail giant Wal-Mart said yesterday it will start selling nearly 300 generic drugs at a steep discount in Florida with the hope of expanding the discounted drug prices nationwide next year.

The move to charge $4 for 291 generic drugs in Tampa starting today puts pressure on its competitors, although other retailers said yesterday they do not currently plan to follow suit.

“At this time, $4 is not enough to drive a change in individual behavior,” said Walgreens spokesman Michael Polzin. “A large percentage of our customers are insured with copayments between $5 and $6, so this will not have a big impact.”

Rite Aid, which has 87 stores in the Washington area, does not plan to lower generic drug prices, said spokeswoman Jody Cook.

CVS, which has the most pharmacies in the Washington area of any of drugstore chain, did not return calls for comment.

Shares of CVS Corp. fell the most in almost five years, declining $2.96, or 8.4 percent, to $32.47 yesterday on the New York Stock Exchange. Rite Aid Corp. declined 5 percent and Walgreen Co. dropped 7.4 percent.

Consumers are increasingly using generics, which often are made by multiple companies after the original patent on a drug expires. The average monthly cost for a generic drug prescription is $28.74, according to the National Association of Chain Drug Stores, compared with $96.01 for branded drugs.

Generic drug sales are an important part of pharmacies’ business because they bring in higher profits than brand-name drugs. Pharmacies pay less for generic drugs because drug manufacturers must compete against each another for the pharmacies’ business.

Independent pharmacies, unlike large drugstore chains, are not able to afford reducing the cost of drugs, they said.

“You have to be able to cover costs,” Leo Mallard, who operates Calvert-Arundel CARE Pharmacy in Owings, Md. “We would maybe match those prices as long as we are not losing money and not infringing on contracts with insurers.”

Said Rebecca Snead, executive director of the Virginia Pharmacists Association: “Independent pharmacies cannot sell generics at that price.”

Gerson Serody, chief executive officer of CARE Pharmacies, an Arlington organization representing 60 independent pharmacies in the Washington area, left the door open for change.

“I am analyzing it to see how it shakes out. It is possible that we may have a list of generics that consumers can get for $4,” Mr. Serody said.

The Generic Pharmaceutical Association, a trade association, said generic medicines account for 56 percent of all prescriptions dispensed in the United States, but 13 percent of all money spent on prescription drugs.

After the announcement, critics pounced on Wal-Mart, claiming the world’s largest retailer will use the low-priced drugs to entice shoppers to buy other Wal-Mart products, a business tactic known as “loss leading.”

But Wal-Mart spokesman David Tovar dismissed that claim.

“This program is not a loss leader for us,” Mr. Tovar said. “It will be a profit creator for us.”

Mr. Tovar said Wal-Mart will not charge a sign-up fee to participate in the program and consumers will not have to pay premiums or deductibles to get the $4 drugs. Wal-Mart has 19 stores in the Washington area.

The number of drugs being sold at the discount is low compared with the overall number of generic drugs Wal-Mart stocks. A company spokesman said Wal-Mart dispenses “thousands” of generic drugs but did not provide an exact number.

The drugs included in the program are widely prescribed and, for the most part, not expensive. For instance, the popular high blood pressure generic medications furosemide and hydrochlorothiazide sell for close to $4 already, pharmacists said.

But Bill Simon, executive vice president of the company’s Professional Services Division, said buying a 30-day supply of the diabetes drug Metformin for $4, is nearly 50 percent cheaper than the brand-name version.

This article is based in part on wire service reports.



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